Orrstown Financial Services, Inc. (NASDAQ:ORRF) has announced that it will be increasing its dividend from last year's comparable payment on the 17th of February to $0.30. This makes the dividend yield about the same as the industry average at 3.3%.

Orrstown Financial Services' Earnings Will Easily Cover The Distributions

We like a dividend to be consistent over the long term, so checking whether it is sustainable is important.

Orrstown Financial Services has a long history of paying out dividends, with its current track record at a minimum of 10 years. Based on Orrstown Financial Services' last earnings report, the payout ratio is at a decent 25%, meaning that the company is able to pay out its dividend with a bit of room to spare.

Over the next 3 years, EPS is forecast to expand by 4.7%. Analysts forecast the future payout ratio could be 27% over the same time horizon, which is a number we think the company can maintain.

Orrstown Financial Services Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of $0.28 in 2016 to the most recent total annual payment of $1.20. This means that it has been growing its distributions at 16% per annum over that time. We can see that payments have shown some very nice upward momentum without faltering, which provides some reassurance that future payments will also be reliable.

The Dividend Looks Likely To Grow

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. It's encouraging to see that Orrstown Financial Services has been growing its earnings per share at 11% a year over the past five years. With a decent amount of growth and a low payout ratio, we think this bodes well for Orrstown Financial Services' prospects of growing its dividend payments in the future.

Orrstown Financial Services Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Distributions are quite easily covered by earnings, which are also being converted to cash flows. All in all, this checks a lot of the boxes we look for when choosing an income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. Earnings growth generally bodes well for the future value of company dividend payments. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.